FocusCHINAPLAS '13: Restocking to buoy up China PE, PP in Q3

20 May 2013 05:56[Source: ICIS news]

By Chow Bee Lin

GUANGZHOU (ICIS)--China’s polyethylene (PE) and polypropylene (PP) import prices may increase in the third quarter as buyers are expected to replenish their stocks on the back of improved market sentiment, industry sources said on Monday.

On 17 May, the benchmark LLDPE resins prices averaged were at $1,380/tonne (€1,076/tonne) CFR (cost and freight) China, unchanged from four weeks ago, according to ICIS.

For the benchmark PP flat yarn resins, the average prices stood at $1,398/tonne CFR China, 0.4% higher over the same period, ICIS data showed.

Most importers tried to prevent a strong build-up of inventory – preferring to buy on a “hand-to-mouth” basis – as they were expecting downward pressure on prices when fresh supply becomes available in the region in the near term.

In Singapore, ExxonMobil is expected to ramp up production at its two new linear low density PE (LLDPE) plants with a combined capacity of 1.3m tonnes/year in May/June, according to market players, but this could not be confirmed with the producer.

In China, the joint venture PE and PP plants of Sinopec and SK Energy are expected to start up in end-May, while Sichuan Petrochemical is due to commence production at its plants in July.

PE and PP prices are also likely to take the cue from crude oil prices, which are showing some stability. A typically stronger downstream demand in July/August could nudge up polyolefin prices, a source with a Malaysian producer said.

China, which is a key PE and PP market, is expected to attract more inflows of foreign capital amid expectations that the world's second biggest economy will perform better in the second half of the year. More capital flows should help pump up liquidity in the commodity markets, a Chinese trader said.

But any PE, PP price increases in the third quarter are likely to be moderate as downstream demand in China is still weak, industry sources said.

“Downstream demand has somewhat improved, but the improvements are not significant,” a China-based source at a Saudi Arabian producer said in Mandarin.

The Middle East is a major supplier of PP, PEto China.

China is currently holding its 27th International Exhibition on Plastics and Rubber Industries or Chinaplas 2013 – a major annual trade fair – in Guangzhou.